Chicago electronics store question

Discussion in 'General Electronics Chat' started by AndyJ, Dec 26, 2012.

  1. AndyJ

    Thread Starter New Member

    Dec 26, 2012
    3
    0
    Hi all! A question for anyone from Chicago!

    I do electronics for a living and hobby, like many of you. I'm thinking of opening an electronics store to cater to the hobbyist and student markets in Chicago. Would you make use of it, even for "oh crap!" deadline stuff?

    Lets say it had:


    • Fully stocked walls of passives, priced by the inch of tape.
    • Very reasonable prices (Ain't nobody want to pay $5 for 5 resistors!)
    • Full stock of Raspberry Pis, Arduinos, ICs, programmers, etc.
    • On-site laser cutting/engraving
    • Classes/meetups and contests

    How often would you visit? How much might you spend? Just trying to gauge! Thanks.
     
  2. spinnaker

    AAC Fanatic!

    Oct 29, 2009
    4,887
    1,014
    There is a reason there are no electronic stores in most cities.

    My suggestion would be to start an online store first and see how it goes. You could still organize meetups and such by renting space. You might even be able to get free space from a school or college.

    If you did want to open a store front then I would suggest opening a place that sells consumer electronics too. Sort of like what Radio Shack used to be like.

    Also it would help if you had some contacts with engineering firms, electronic manufacturers, schools universities etc. Any place that would buy components in bulk. This is how the smaller stores of yesteryear would operate. And how most of the big online stores still do.

    Another idea would be to contact Sparkfun. Perhaps they would be interested in you opening a storefront in Chicago. They are an already established store and could help send business your way.
     
  3. Papabravo

    Expert

    Feb 24, 2006
    10,145
    1,791
    I second that suggestion. Without a solid background in retail and merchandising or a franchising arrangement you're taking your financial future and potentially flushing it right down the toilet.

    Imagine if you could open a Digi-Key franchise storefront. Order it online and pick it up the next day. I'd jump at that opportunity. I just did that with Ace Hardware. I wanted a package of 3/32" brass rods 3' long. It wasn't exactly the next day but close enough.

    What about an Amazon storefront? Order from Amazon and pick it up at your location. It would be way more efficient for UPS/FedEx to drop things off for a wide area at your location and have folks pick things up after work and on weekends.
     
  4. AndyJ

    Thread Starter New Member

    Dec 26, 2012
    3
    0
    You both have a good idea. I did consider making it "will-call only." You order online and pick up.

    Chicago being a big city, we have lots of schools, many that specifically focus on electronics, so of course we'd be in contact with them. The idea is to provide a store people on a deadline or who need something last second can go and pick things up. More then that, it's a place to ask opinions and discuss projects.

    I have a solid background in advertising and business (I'm a professional in the film industry full time) so I wouldn't be "flying blind."

    Thanks for the responses so far, I'd love to hear more. That's why I posted!
     
  5. dataman19

    Member

    Dec 26, 2009
    136
    29
    The reason there are no longer "Electronics Stores" in most cities is the "Distributors". The Distributors have essentially bypassed the "retail" chain and gone straight to the consumer, often giving the "Wholesale/Distributor Price" to on-line customers.
    ..
    Then there are the City/Municipalities who see great riches in "Inventory Taxes" and even go as far as to "waive Inventory Taxes" for "National Distributors and Large Box Retailers like Wally World" (which also gets to keep up to 60% of collected sales taxes - at least here in Arizona).
    ..
    Our Electronics Store "Capital Electronics" closed their door the last week of November. So now we have to mail order everything. Capital Electronics is liquidating inventory via eBay - but the prices are basically MSRP....
    ...
    I agree, the best way is to go "On-Line", but take care with the distribution houses (they sell direct too - even the ones who say they don't are out right lying). I think the best plan of action would be the old "Poly Pacs" method. Back in the 60's/70s there was a Massachusetts company that solt variety packs of coponents. At the time I was mostly buying from classifieds in Electronics News (an Electronics Parts Industry newspaper where over stocks and over-runs were sold on the spot market. For example: in 1983 I bought 200 4164 64Kx1 DRAMs for $50.00 , which worked out to about $0.25 each - even though the normal price for them at the time were over $2.00 each. To make it more interesting, I was stationed in West Germany, and a few friends and I upgraded CoCo computers to dual 64Kb memory banks - a teckie nerd thing, I know - but none the less challenging.)
    ..
    I always bought a lot of parts this way, I even helped an associate back in Nashville, Tennessee start an Electronics store that sells nationally over the internet (at least they started Internet sales within the last 10 years). hey went on-line because after 15 years their market share was dropping (due to Distributors selling on-line direct to their customers) so to combat hings we set up a volume purchasing strategy whereby we contacted "all" of the US semiconductor and component manufacturers and "offered to purchase their over-runs. This worked out so well that my associate is stuck with several warehouses full of just about every conceivable electronic component (and about $100K worth of brand new vacuum tubes). Since the city of Nashville and the state of Tennessee literally "waived" his inventory tax requirements in order to keep him around, and the 475 employees he has (You see, the employees make money, and they tend to spend it on things like houses, cars, groceries, etc - all of which generate sales taxes. So the City and state do in fact gain from having him around.
    ..
    But this strategy only works for the wealthy - trust me. If you ain't got "Millions - forget it. Just like here in Phoenix, AZ. We look to move into a 6,500sft facility to split our packing plant. We currently have a 5,500sft facility and the lease is really reasonable (the property is owned by a local Billionaire). Our lease is so low because he virtually pays "no property taxes" (Not really true - he pays about $1,485 a year for the seven buildings and 25 acres that they sit on. The "new" building has a lease four times as high, and the owner pays six times more property taxes for 1/10th the property. Why? Because he isn't a billionaire, he is a refular property owner, and as such under the Phoenix municipal code - "No Eligible for Property Tax incentives" - that's what the City of Phoenix call it - "Property Tax Incentives - to keep the rich happy".
    ..
    So you have a lot to deal with. Inventory, storage of inventory, inventory taxes, Payroll, insurance, workers comp insurance, workers medical insurance, accounting fees (accountants don't work for free), oh yea - and legal fees (you better retain a "really good" lawyer too. Then you have to price your inventory (figure your overhead and cost of inventory - cost + shipping and handling to get it), then figure a decent "profit" (No I'm not telling you you can buy 10,000 1/4 watt resistors for $0.00125 each - the going price from manufacturer, and then make a killing selling them for $0.25 each on eBay - WAKE UP!!! Get real. Price your stuff so that you can make a comfortable profit, yet pay for the stuff and all the "other" expenses.
    ..
    Personally, I think On-line would be the way to go. Just remember, if your distributor sees a lot of stiff going through you - they need only "look" at your on-line website to figure out how they can sell under your price to get the customers direct. Such is the 21st century politics of the Electronics Industry.
    ..
    Point (I promise I will shut up after this point)....
    In todays eBay driven marketing you have people who make stuff and have always sold it to dstributers. They make it and sell say 10,000 units to the importer/exporter/Distributor for say $6.00 each (not bad $60K for stuff that only costs about $30K to make). The distributor/Importer/Exporter pays all the shipping and any duties (Customs fees, etc) and wholesales that item for say $9.50 each. The end seller sells it Retail for about $12-14 each. But..... the retailer has a web site. So the producer one day is looking on the web as sees "His" product.... Cool!! They have my widget!!! Then he sees the price.... Oh my, "I'm not charging enough".... Then he get a brilliant ide... He sets up his own web site, then takes it one step further. He puts his stuff on eBay and sells direct for $10.50 each + the $14.95 Flat Rate Postage. Orders stream in - he's rich. Then reality hits, now "his" workers want higher wages, and his wholesale costs start inching up, then there are all those pesky eBay and PayPal fees, Man he's having ulcers because he is now producer, marketer, and retailer, and worse of all - he is the ultimate totally responsible party to get everything shipped, etc.... Man,,,, he thinks, it was way too simpler and a lot less hassles to boy up those pallets and ship to the Distributor/Importer/Wholesaler than to deal with all these wackos who think these widgets make good hammers, and when they quit working they are constantly complaining - "Wah, My Widget is broken!!! YOu sold it to me - send me another one for free!!!!" So he calls the Distributors/Importers/Exporters that he did business with a few years back to see if they would like to reorder... "Bling,, Blang,,, Bling "I'm Sorry, that number is no longer in service, please check your number and call again,,,, bling, blang,,, ding" You see, the Distributor/Importers/Wholesalers are all out of business - hard to sell stuff for more than you paid for it and meet payroll, rents/lease or expenses. So the entrepreneur has baically put them out of business, and will soon be out of business himself. The sad thing is: People readily pay $90.00 for an item on eBay that they could buy in the store for say $100.00, and then readily (and without a second thought, shell out an additional $49.95 for shipping and handling. - What's up with that? they pay $139.95 for something they can buy in the store for $100 ??? That's right! Welcome to the eBay economy, where common sense fly's right out the window....
    ....
    WallMart is just as bad - but I promissed to shut up...
    ..
    Still, I want to wish you luck in opening your on-line store. If you need any Web Site assistance, let me know, I can help you locate a decent SQL databased E-Commerce package that will generate income, instead of siphon it away.
    ..
    I look forward to seeing your web site up and running...
    ..
    Dave
    Phoenix, AZ
     
  6. dataman19

    Member

    Dec 26, 2009
    136
    29
    Don't let the "nay sayers" drive your train.....
    ..
    A will Call set up would be perfect. Now all you need is product. I suggest you research some purchasing skills and set up a target industry - like Mobile Audio Video. Auto Sound Installers and Sound shops are always looking for product - in fact the Auto/Mobile sound industry is about the only one left that will help protect their distributors. People who own Auto/Mobile sound shops should welcome the ability to order it by 10:00AM and Pick up at 1:00 Will Call....
    ..
    Need help, call/PM me.
    ...
    Dave
    Phoenix, AZ
     
  7. MrChips

    Moderator

    Oct 2, 2009
    12,446
    3,362
    Well I am no marketing expert but I can see both sides of the story: what the consumer/tech/hobbyist wants and what would keep a store alive.

    Before the advent of internet/online purchasing/big distribution business/ I used to enjoy visiting the surplus and retail stores. You cannot beat having the exact component in your hand, switches, knobs, connectors, cases etc. that would be difficult to see on a catalog or screen. Many times parts have arrived which were completely wrong completely from my error.

    The nearest retail distributor is 15 mins drive from me and still sometimes it is more cost effective for me to order online. I can place and order at 5pm and have delivery by 10am next day, no minimum, no shipping. On the other hand, the online distributor had no stock and I still ended up driving to the retail store for parts that I needed immediately, especially when you have to repair something in a hurry.

    10 - 20 years ago, the best bargins were to be found at surplus stores, stores that bought out production overruns, excess, end of line etc. This is great for the hobbyist who only wanted one unit but would spell disaster for an OEM that relied on continuing supply of genuine parts. Now all the surplus stores are gone and every thing is in a bubble pack.

    Even the technical bookself has gone since everything is now available on line.

    So the problem is how can you be profitable when you are competing with large computerized online distributors that will stay in business by selling in volume?

    I think for a retail store to stay in business you have to have a niche market, eg., selling Arduinos, robotics, raspberry pi, electronic kits and breadboard kits. Make sure you are located near a major college, university, technical school, etc. Consider offering evening courses on electronics, computers, programming. By all means, provide on-line purchasing. There are a number or small online stores that cater to hobbyists. Check out their sites and make notes. Keep your overhead low... but then, I'm no financial guru.

    I just looked back at the five items you listed and all are great to have. Another service you may be able to provide is single quantity PCB fabrication using a computerized milling tool. This is easy to set up and operated but the initial price is steep. (Thing also 3D printing.)

    I imagine selling resistors, capacitors, transistors, ICs is a bit of a loss leader because of the large overhead of stock required and the low dollar volume. Perhaps selling kits with components and PCB would have a higher markup?
     
  8. AndyJ

    Thread Starter New Member

    Dec 26, 2012
    3
    0
    Thanks for the response,


    Here in Chicago, there really is no option to have free overnight shipping for any distributor. Locating it near a school is a really great idea, and certainly something that I'd keep in mind.

    I know that the Arduinos, Raspberrys, and kits would yield the real profit--luckily they pretty much sell themselves! The PCB layout/fab service is another great idea. Heck, we can offer classes on it.
     
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